UPI Payments Surge By 62% In First Half YoY, Fueled By Person-To-Merchant Transactions: India Report 2023

Fueled by zero transaction fees and widespread acceptance, person-to-merchant (P2M) transactions in India are projected to constitute 75 percent of all United Payments Interface (UPI) transactions by 2025, as per a report released on Tuesday (26 September).

The "India Digital Payments Report for H1 2023," issued by global payments service provider Worldline, reveals that UPI transactions in India surged by 62 percent in the first half of 2023 compared to the same period last year.

This growth has primarily been driven by P2M transactions. Out of the total 51.91 billion UPI transactions conducted between January and June this year, 29.15 billion were P2M payments, accounting for approximately 56.1 percent of the total.

The remaining transactions, 22.75 billion, comprised person-to-person (P2P) transactions. Moreover, P2M transactions are experiencing rapid growth, with a 119 percent increase compared to a 41 percent rise in P2P transaction volume in H1 2023.

The report noted that while the removal of transaction fees for merchants contributed to the growth in P2M transactions, it also indicates the extensive acceptance of this payment method by both buyers and sellers.

"Beyond low fees, merchants are also looking for security and timely payments, among other things, and UPI delivers here. The other fact is that with the dominance of P2M transactions, UPI is going to become even more entrenched with the population, and growth will continue at this rapid pace," the report stated.

The report further highlighted that the average ticket size (ATS) of UPI transactions in the first half of 2023 was Rs 1,604, marking a 10 percent decrease from Rs 1,774 during the same period last year.

This decline in ATS, coupled with the substantial increase in the number of UPI transactions, suggests that UPI is increasingly being used for smaller payments.

"The key driver for this growth has been the widespread acceptance of UPI for both personal and payment transactions from the user/buyer standpoint, as well as high acceptance by merchants. Additionally, there has been greater penetration of UPI in rural India," the report explained.

The drop in overall ATS has also been influenced by the reduction in ATS ticket sizes for P2M transactions, which saw a 21 percent decline from Rs 839 to Rs 659. In contrast, the ATS for P2P transactions rose by 15 percent from Rs 2,442 to Rs 2,812 during the same period.

"Given that the future of UPI lies in P2M transactions, this is a positive trend. It indicates that UPI is increasingly being used for micro-transactions, ensuring greater user engagement with the product," the report concluded.

The report also noted that three mobile apps—PhonePe, Google Pay, and Paytm—account for 95.68 percent of all UPI transactions in India by volume, and 93.65 percent by value as of June 30.

PhonePe's market share in terms of volume has remained stable, rising from 45.8 percent in June 2022 to 47.2 percent in June 2023. In terms of value, its market share increased from 48.8 percent to 49.8 percent.

Meanwhile, Google Pay's market share has been declining in terms of value, with its share in the number of UPI transactions increasing from 34 percent to 34.6 percent. Conversely, Paytm's share declined from 14.7 percent to 13.8 percent.

Paytm Payment Banks emerged as the top UPI beneficiary bank, with a volume of 11.6 billion, followed by Yes Bank with 9.6 billion and the State Bank of India (SBI) with 5.7 billion.

On the other hand, HDFC Bank was the leading UPI remitter bank, with a volume of 46.3 billion, followed by the Bank of Baroda with 34 billion and the Union Bank of India with 32.4 billion.

"The allure of digital payments beckons both consumers and merchants alike, evolving it into an indispensable facet," said Ramesh Narasimhan, Chief Executive Officer (India) at Worldline.